The European Central Bank has released a document and video promoting its digital euro and attempting to allay concerns about the CBDC investments it is trying to limit.
Ulrich Bindseil, Jürgen Schaaf, and executive board member Piero Cipollone explained in a Feb. 19 blog post that the digital euro CBDC would be “designed for payments, not investments.”
They added that many banks are concerned that their customers might withdraw their deposits to hold digital euros. “These concerns are unfounded,” they said.
The European Central Bank is developing a digital euro CBDC with legal tender status as a digital payment solution for Europe. However, there are growing concerns that deposits could flow from retail banks to the central bank that controls the CBDC.
It stated that “CBDCs could affect financial institutions as depositors may choose to move funds from bank deposits to the central bank.”
A digital euro is not suitable for holding
Therefore, individual holdings of digital euros would be limited to preserve the role of commercial banks. Furthermore, CBDCs would not pay interest and would not hold any company shares.
The document states that a “reverse waterfall” mechanism would link digital euro accounts to bank accounts, making up for any shortfalls in the latter. This reduces the incentive to hold large digital euro balances.
The ECB designed the digital euro to mitigate the risks of disintermediation and large outflows of bank deposits. The combination of restrictions, no interest, and a “reverse waterfall” would discourage its use for investment purposes.
The ECB also warned about the threat posed by stablecoins and “electronic money,” which could refer to cryptocurrencies.
“Stablecoins, electronic money institutions, and other narrow banking institutions, some of which are sponsored by large technology companies with large customer bases, do not care about the role of banks in the economy. Non-bank institutions have no obvious incentive to restrict the use of their stablecoins or the services they provide, and stablecoin use could become significant.”
Essentially, the ECB is saying that a digital euro is not a store of value.
CBDC: Central banks have more control
The ECB also released a video explaining the benefits of a digital euro. It mentions “safeguards for financial stability, such as limits on holdings of digital euros.”
What it doesn’t mention is that transactions will be monitored, monitored and linked to digital identities.
In an extremely totalitarian scenario, if such legislation were to come into force, the central bank would have even greater power to restrict spending based on carbon usage.
Earlier this month, media reported that three major European banks, including the European Central Bank, are actively working to undermine Bitcoin because it threatens their CBDCs.
Furthermore, European banks have been spreading FUD and misinformation to scare the public. #数字欧元 #CBDC